Last year saw the biggest annual increase in the number of registrations of battery-electric cars. More than 395,000 were registered, a 92% increase compared with 2020. in July 2022, battery-electric cars had a market share of 10.9% of all new car registrations. Driving ‘green’ is growing fast!
In your accounts, electric vehicles are often dealt with differently to petrol and hybrid cars. The Spicer & Co team is often asked about how electric driving is dealt with in business accounts. With this in mind we’ve created some handy tips below, showing the main accounting issues with electric vehicles (EVs).
If you’re still thinking about converting to an electric vehicle, here are some business benefits to consider:
– Lower running costs
– Congestion & LUEZ charge exemption (London)
– Lower maintenance expenses
– Exemption from road tax
– Promoting your business as environmentally friendly
You may have concerns such as the battery range or the number of charging points available. These issues are improving with some new service stations dedicated to charging EVs. However the type of driving you need to do is a critical factor when deciding if the time is right for you. Whilst the upfront cost of EVs is still high, grants and incentives are available.
5 Accounting Issues for EVs
1. Corporation Tax. The initial cost of new and unused fully electric vehicles can be offset against corporation tax (100%). It’s important to note that the vehicle must be bought by the business rather than an individual. Leased electric cars do not qualify for this allowance.
2. Benefit-in-kind (or BIK) is a tax on employees who receive benefits or perks on top of their salaries. Personal use of the business EV will involve a BIK payment. This is currently 2% (of the car value inclusive of VAT and any extras) and is set to remain at 2% for 2023/24 and 2024/25.
3. VAT. To reclaim the VAT on any EV, it needs to be used exclusively for business.
4. Lease payments for an electric car are fully deductible against corporation tax.
5. Hire Purchase. If your EV is bought with a Hire Purchase agreement, your business benefits from the 100% first year capital allowance. Plus, the interest on monthly payments is tax-deductible, saving corporation tax.
“EVs are treated differently to other cars within business accounts,” says Suzanne Spicer of Spicer & co Chartered Accountants. “It’s important to understand the issues involved and make the most of the opportunities available.”
Are you thinking of driving green?
New diesel and petrol cars will no longer be manufactured from 2030, hybrids from 2035. This means your move to driving EVs may be closer than you think!